I'm in $RUT Nov. 1150/1160 CCS for 1.00 credit as a hedge against my 3 Put spread positions.
— The Lazy Trader (@lazytrading) October 14, 2014
Here are the details:
Sell 2 RUT November 1150 Call @3.14
Buy 2 RUT November 1160 Call @2.14
Credit: 1.00 ($200 for 2 contracts per leg)
Max Risk: 9.00 ($1800)
Days to expiration: 37
I normally don't sell Calls if the markets are not overbought. Today I had to make the exception due to the fact that I have 3 Credit Puts spread in November and no Credit Call spreads at all. So, if the market rallies, the 3 Put spreads will make me happy and I won't care so much about being hurt on a Call spread. If the market keeps falling, it'll suck, but it'll suck a little bit less than before because at least I will be making money with this Credit Call spread.
As for the exit strategy, I don't think I'll hold it until expiration. I'll probably be closing it at 0.30 - 0.40 debit if that ever happens. I don't want to wait until expiration in this case as November is historically a strong month and this Call spread was not entered during what I call "ideal" circumstances.
As usual, a chart for future reference:
(Click on image to enlarge)
Current positions after this trade:
October RUT 1230/1240 Bear Call Spread
$220 credit. Will expire this Friday for max profit.
November RUT 970/980 Credit Put Spread
$120 credit. 83% probability of success and 37 days to expiration. Now part of 970/980/1150/1160 Iron Condor. Will adjust if RUT goes down to 1030 this week.
November SPX 1755/1760 Credit Put Spread
$120 credit. 80% probability of success, 37 days to expiration. Will adjust if SPX hits 1845 or so this week.
November RUT 910/920 Credit Put Spread
This position was opened as part of the adjustment to the 1020/1030/1234/1240 October Iron Condor. $201 credit. 96% probability of success, 37 days to expiration. Closing it for 0.20 debit will totally cover the loss on the October Iron Condor. I want to close it for that price, but maybe end up happy with 0.30 debit or so.
November RUT 1150/1160 Credit Call spread
$200 credit. 37 days to expiration. Will help me mitigate the excessive downside exposure on the portfolio.
I'm not gonna lie. This is a very challenging time and the portfolio is in an emergency situation. In spite of that, I am confident that I can control the disaster and minimize the portfolio draw-down as adjustments on the Put side with a high VIX environment would allow me to go very far out of the money. We're talking RUT options below 900 and SPX options in the low 1600's. Those should stop the bleeding. If no adjustments are needed, much better then!
Check out 2014 Track Record
Weekend Portfolio Analysis (October 18, 2014)
Weekend Portfolio Analysis (October 25, 2014)
Credit Call spread has to be adjusted to 1180/1185 (October 28, 2014)